According to aReutersreport, the
Taiwan Semiconductor Manufacturing Company (TPE:2330) has
begun trial production of the A5 CPU found in the iPad 2, in a move that
clearly signals Apple's desire to drop Samsung.

However, according to the report, Apple may find
doing so difficult. Samsung helped design the A5, reportedly, and holds
key patents on some of its technology. Also, TMSC may have difficulty
replicating the design without defects. Lastly, despite the companies'
awkward relationship, Samsung is actually trying to convince Apple to keep it
as a supplier.

Fubon Securities analyst William Wang is quoted as
saying, "Apple is trying to diversify its orders but it will still
maintain some kind of relationship with Samsung. I think TSMC will get the new
chip orders, the issue however is allocation. Apple won't give the whole 100
percent to TSMC. Maybe it'll allocate only 20-30 percent."

TMSC is an attractive replacement, though.
The company is the world's top contract chipmaker. It also has
extensive experience working with British architecture firm ARM Holdings Plc. (LON:ARM), which
makes the underlying architecture for virtually all smart phones and tablets on
the market. TMSC has also just completed a $7.8B USD expansion of its
production facilities, including developing new process technologies.

Apple reportedly hopes to go exclusively with TMSC
for its next generation CPU. While the last two generations were named
the A4 and A5, respectively,Reuters reports that the next gen CPU will
bear a different a non "Ax" branding.

Seo Won-seok, an analyst at NH Investment and
Securities in Seoul, South Korea is doubtful that TMSC will earn the majority
of the chip production contract, though. He states, "It won't be
easy for Apple to dramatically change its chip provider from Samsung. It has to
redesign the chipset, which Samsung has been deeply involved from the beginning
and has some intellectual property. Apple could try various suppliers but they
(Samsung and Apple) need each other and the relationship will continue."

Nobody knows for sure what will happen, but the
unfolding drama is fascinating to watch. Even as Apple and Samsung
directly vie for the top spot in global phone sales, the pair will continue
their tug and pull behind the scenes with regards to their customer-supplier
relationship. Apple may try to ditch Samsung, but the Asian chipmaker
will seek to make America's largest single phone maker an offer too compelling
to refuse.